Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Order Approving Proposed Rule Change and Amendment Nos. 1 and 2 Thereto To Establish Fee and Notice Requirements for Substitution Listing Events and Other Corporate Changes, 67511-67513 [05-22181]

Download as PDF Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Notices performance, such ratings do not frequently change once they are issued. NASD will announce the effective date of the proposed rule change in a Notice to Members to be published no later than 30 days following Commission approval. If the Commission approves the proposed rule change without material amendment, NASD is proposing that the rule change become effective immediately upon Commission approval, since the proposed rule is already in effect on a pilot basis. If the proposed rule change is approved only after material amendment that would require members to substantially modify their compliance systems or procedures, NASD will propose a later effective date to provide adequate time for such modifications. 2. Statutory Basis NASD believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act, which requires, among other things, that NASD rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. NASD believes that making IM–2210–5 and Rule 2210(c)(3) effective on a permanent basis will allow members to continue to publish sales material that contains bond fund volatility ratings in a manner that will protect investors and serve the public interest. B. Self-Regulatory Organization’s Statement on Burden on Competition NASD does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: VerDate Aug<31>2005 16:38 Nov 04, 2005 Jkt 208001 (A) By order approve such proposed rule change; or (B) institute proceedings to determine whether such proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. The Commission particularly urges commenters to consider the proposed rule change in light of the specific comments that the NASD urged the Commission to seek. Specifically, the Commission requests comment on whether the timeliness requirements of IM–2210–5(b)(2) should be modified to mirror the requirements pursuant to Rule 482 under the Securities Act of 1933. In other words, should the rule require all supplemental sales literature that includes a bond fund volatility rating either to show a rating that is current to the most recently ended calendar quarter prior to use, and disclose where the reader may find the most recent month-end rating, or provide the most recent month-end rating in the sales literature? Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NASD–2005–117 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–9303. All submissions should refer to File Number SR–NASD–2005–117. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the PO 00000 Frm 00102 Fmt 4703 Sfmt 4703 67511 public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549. Copies of such filing also will be available for inspection and copying at the principal office of NASD. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to the File Number SR–NASD–2005–117 and should be submitted on or before November 28, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.9 Jonathan G. Katz, Secretary. [FR Doc. 05–22178 Filed 11–4–05; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–52712; File No. SR–NASD– 2004–162] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Order Approving Proposed Rule Change and Amendment Nos. 1 and 2 Thereto To Establish Fee and Notice Requirements for Substitution Listing Events and Other Corporate Changes November 1, 2005. I. Introduction On October 26, 2004, the National Association of Securities Dealers, Inc. (‘‘NASD’’), through its subsidiary, The Nasdaq Stock Market, Inc. (‘‘Nasdaq’’), filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to establish fee and notice requirements for substitution listing events and to provide additional transparency for corporate changes requiring a record-keeping fee. Nasdaq amended the proposal on May 11, 2005 3 and August 18, 2005.4 The proposed rule change, as amended, was 9 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 Amendment No. 1 superseded and replaced the filing in its entirety. 4 Amendment No. 2 superseded and replaced the amended filing in its entirety. 1 15 E:\FR\FM\07NON1.SGM 07NON1 67512 Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Notices published for notice and comment in the Federal Register on September 22, 2005.5 The Commission did not receive comments on the proposal. This order approves the proposed rule change, as amended. II. Description of the Proposal Nasdaq proposes to amend NASD Rules 4200(a), 4310, 4320, 4510, and 4520 to establish fee and notice requirements for each ‘‘substitution listing event.’’ The term ‘‘substitution listing event’’ would include: (1) The implementation of a reverse stock split; (2) an issuer’s re-incorporation or a change in the issuer’s place of organization (including a change in the issuer’s state of incorporation); (3) formation of a holding company that replaces a listed company; (4) the reclassification or exchange of an issuer’s listed shares for another security; (5) the listing of a new class of securities in substitution for a previously listed class of securities; and (6) any technical change whereby the shareholders of the original company receive a share-for-share interest in the new company without a change in their equity position or rights. Nasdaq-listed securities may be divided into two groups: (1) Nasdaqlisted securities that Nasdaq designates as Nasdaq national market system securities, pursuant to NASD Rule 4400 Series (‘‘Nasdaq designated securities’’); and (2) all securities that are listed on a national securities exchange and subsequently listed on Nasdaq but not designated by Nasdaq as Nasdaq national market system securities (‘‘Nasdaq non-designated securities’’).6 For Nasdaq designated securities, the proposed notice requirement and fee would apply. For Nasdaq nondesignated securities, only the proposed notice requirement, and not the proposed fee, would apply. Nasdaq has stated that, when it learns about a substitution listing event for a Nasdaq-listed security, it must implement technical changes to its trading, market data, and internal monitoring systems. In addition, Nasdaq would disseminate certain substitution 5 See Securities Exchange Act Release No. 52430 (September 14, 2005), 70 FR 55643. 6 If a security is originally listed on an exchange and designated by the exchange as a national market system security under the exchange’s national market system plan, Nasdaq would not exercise its authority to later designate the security as a national market system security under its own national market system plan. This arrangement creates uniformity across all markets with respect to a dually listed security’s ticker symbol, trading halt declarations, trade reporting, and status under the trade-through provisions of the Intermarket Trading System Plan. See NASD IM–4400. VerDate Aug<31>2005 16:38 Nov 04, 2005 Jkt 208001 listing event information about the issuer of a Nasdaq-listed security to other markets and market participants through a subscription service.7 For a substitution listing event relating to a Nasdaq designated security, Nasdaq would directly contact the issuer to verify the details of the event. For a substitution listing event relating to a Nasdaq non-designated security, however, Nasdaq would not contact the issuer directly to verify the details of the event; instead, Nasdaq would receive an electronic consolidated report from the national securities exchange that has designated the security as a national market system security under that market’s national market system plan. The exchange would disseminate information on the substitution listing event for that security. Nasdaq would use this electronic consolidated report to make the necessary changes to its systems.8 Nasdaq has represented that it has dedicated specific resources to manage the process for collecting and verifying information for substitution listing events and for implementing the related changes for its issuers so that such changes are accurately and promptly reflected in its trading, market data, and internal monitoring systems. To support these activities, Nasdaq proposes to establish a fee of $7,500 per substitution listing event for issuers of Nasdaq designated securities. Nasdaq has stated that, since the costs associated with managing the information for substitution listing events for issuers of Nasdaq non-designated securities are reduced through Nasdaq’s use of electronic consolidated reports from other markets, it would waive the substitution listing event fee for these 7 Nasdaq has stated that it provides advance notification of certain substitution listing events, such as reverse stock splits, to member firms, market data vendors, service bureaus, and other subscribers of its daily list service. Notification of the substitution listing event information on Nasdaq’s daily list service is subsequently provided to users of Nasdaq’s systems through a fifth letter identifier, such as a ‘‘D,’’ that is temporarily added to an issuer’s trading symbol. Re-incorporations or changes to the place of organization are recorded in Nasdaq’s internal database, but are not disseminated to market participants. 8 For example, Nasdaq stated that it uses electronic reports from the New York Stock Exchange (‘‘NYSE’’) to verify the details of the substitution listing events for NYSE-listed securities that are subsequently also listed on Nasdaq but are still designated by the NYSE as national market system securities pursuant to the NYSE’s national market system plan. The consolidated reports from the NYSE contain information regarding reverse stock splits, the substitution of a previously listed class of securities for another class, the creation of a holding company, and the reincorporation or change to the place of organization of an issuer. PO 00000 Frm 00103 Fmt 4703 Sfmt 4703 issuers.9 Waiving these fees also would eliminate the possibility that these issuers would be charged twice for the same substitution listing event, since other markets charge these issuers a fee for substitution listing events. For example, both NYSE and the American Stock Exchange LLC (‘‘Amex’’) charge a fee for substitution listing events. NYSE charges a ‘‘Reduced Initial Fee’’ of $15,000 for a substitution listing event 10 and Amex charges $5,000 for a substitution listing event.11 Under the amended proposal, issuers of both Nasdaq designated securities and Nasdaq non-designated securities would be required to notify Nasdaq about a substitution listing event no later than 15 days prior to the implementation of the substitution listing event so that Nasdaq would have sufficient time to implement the technical changes into its systems. For a re-incorporation or a change to an issuer’s place of organization, however, Nasdaq would require an issuer to notify Nasdaq as soon as practicable after the event has been implemented, since such an event may be contingent on shareholder approval and would not require immediate changes to Nasdaq’s systems. Finally, the proposal would require an issuer to notify Nasdaq of a corporate action that would require the payment of a record-keeping fee. Specifically, Nasdaq proposes to amend NASD Rules 4310(c)(20), 4320(e)(18), 4510(e), and 9 Nasdaq has represented that the lack of such fees from these issuers would not impair Nasdaq’s ability to fulfill its regulatory responsibilities and enforce its rules. Furthermore, although Nasdaq relies on consolidated reports in managing the substitution listing events process for these issuers, Nasdaq has represented that its rules must be ‘‘designed to produce fair and informative quotations, to prevent fictitious or misleading quotations, and promote orderly produces for collecting, distributing, and publishing quotations’ pursuant to Section 15A(b)(11) of the Act, 15 U.S.C. 78o–3(b)(11). 10 See NYSE Listed Company Manual Section 902.02. The $15,000 fee applies only if the change in the company’s status is technical in nature and the shareholders of the original company receive a share-for-share interest in the new company without any change in their equity position or rights. If the substitution event does not comply with these requirements, the full initial listing fees would apply. 11 See Amex Company Guide Sections 142 and 305. For Amex issuers, a substitution listing fee applies in cases where, after the original listing, a change is made by charter amendment or otherwise by which shares listed on Amex are reclassified, or changed into or exchanged for another security, either with or without a change in par value. Amex also charges a substitution listing fee whenever a company implements a reverse stock split, reincorporates, lists a new class of securities in substitution of a previously listed class of securities, or otherwise engages in a transaction which would require the company to file a new Form 8–A with the Commission in regard to the previously listed security. E:\FR\FM\07NON1.SGM 07NON1 Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Notices 4520(d) to clarify that an issuer of a Nasdaq-listed security that is subject to a record-keeping fee must submit the appropriate form to Nasdaq within ten days after a change that requires payment of a record-keeping fee. Nasdaq has represented that this proposed change reflects the current practice of Nasdaq issuers. III. Discussion and Commission Findings After careful review of the proposal, the Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations applicable to a national securities association.12 The Commission believes that the proposed notice requirement for a substitution listing event is consistent with Section 15A(b)(6) of the Act,13 which requires that the rules of a national securities association be designed to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities; to remove impediments to and perfect the mechanism of a free and open market and a national market system; and, in general, to protect investors and the public interest. Nasdaq is requiring all of its issuers to provide notice of substitution listing events for the purposes of maintaining up-to-date corporate information and disseminating accurate information about its listed securities. This requirement should better enable Nasdaq to perform its essential monitoring functions and enhance the flow of accurate market data. In addition, the Commission believes that the fee for a substitution listing event is consistent with Section 15A(b)(5) of the Act,14 which requires that the rules of a national securities association provide for the equitable allocation of reasonable dues, fees, and other charges among members and issuers and other persons using any facility or system which the association operates or controls. The fee is designed to offset the costs associated with collecting and verifying information related to substitution listing events and for implementing requisite systems changes. The Commission believes that it is reasonable for a listing market to assess fees on its issuers that will enable the listing market to make necessary 12 The Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 13 15 U.S.C. 78o–3(b)(6). 14 15 U.S.C. 78o–3(b)(5). VerDate Aug<31>2005 16:38 Nov 04, 2005 Jkt 208001 systems changes and to carry out its regulatory responsibilities. With respect to the fee waiver for issuers of Nasdaq non-designated securities, the Commission notes that it has previously approved a waiver of fees based on a security’s dually listed status.15 Nasdaq has represented that its costs for processing substitution listing events of Nasdaq non-designated securities are significantly reduced on account of Nasdaq’s reliance on electronic consolidated reports received from the listing market for such securities. On this basis, the Commission believes that the proposed fee for Nasdaq designated securities and the proposed fee waiver for substitution listing event fee for Nasdaq non-designated securities are a reasonable allocation of fees among issuers. Finally, the Commission believes that codifying a requirement for an issuer to notify Nasdaq of the payment of a corporate record-keeping fee is reasonable and consistent with the Act. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,16 that the proposed rule change (SR–NASD–2004– 162), as amended, is approved. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.17 Jonathan G. Katz, Secretary. [FR Doc. 05–22181 Filed 11–4–05; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–52723; File No. SR–NASD– 2005–128] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing of Proposed Rule Change To Establish Rules Governing the Operation of the INET System November 2, 2005. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on November 15 See Securities Exchange Act Release No. 51005 (January 10, 2005), 70 FR 2917 (January 18, 2005) (approving, among other things, the waiver of entry fees, application fees, and additional shares listing fees for securities that are originally listed on a national securities exchange but later dually listed on Nasdaq). 16 15 U.S.C. 78s(b)(2). 17 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 67513 1, 2005, the National Association of Securities Dealers, Inc. (‘‘NASD’’), through its subsidiary, The Nasdaq Stock Market, Inc. (‘‘Nasdaq’’), filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by Nasdaq. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change Nasdaq intends to purchase INET ATS, Inc. (‘‘INET’’), operator of the INET ECN (the ‘‘INET System’’ or ‘‘System’’). Nasdaq proposes to establish rules governing the operation of the INET System and fees for System services. Below is the text of the proposed rule change. Proposed new language is italicized. * * * * * 4950. INET SYSTEM 4951. Definitions Unless stated otherwise, the terms described below shall have the following meaning: (a) The terms ‘‘The INET ECN System,’’ ‘‘INET System,’’ or ‘‘System,’’ shall mean the automated system owned and operated by INET, which is owned and operated by The Nasdaq Stock Market, Inc., which enables Participants to execute transactions in System securities, to have reports of the transactions automatically forwarded to the appropriate National Market Trade Reporting System for dissemination to the public and the industry, to ‘‘lock in’’ these trades by sending both sides to the applicable clearing corporation(s) designated by the System Participant(s) for clearance and settlement, and to provide System Participants with sufficient monitoring and updating capability to participate in an automated execution environment. (b) The term ‘‘System Securities’’ shall mean Nasdaq Market Center eligible securities as that term is defined in NASD Rule 4701(s) and ITS Securities securities as defined in NASD Rule 5210(c). (c) The term ‘‘Participant’’ shall mean an entity that fulfills the obligations contained in NASD Rule 4952 regarding participation in the System. (d) The term ‘‘Nasdaq Market Center’’ shall mean the automated system owned and operated by The Nasdaq Stock Market, Inc. pursuant to NASD Rule 4700 Series. E:\FR\FM\07NON1.SGM 07NON1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 70, Number 214 (Monday, November 7, 2005)]
[Notices]
[Pages 67511-67513]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-22181]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52712; File No. SR-NASD-2004-162]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Order Approving Proposed Rule Change and Amendment Nos. 
1 and 2 Thereto To Establish Fee and Notice Requirements for 
Substitution Listing Events and Other Corporate Changes

November 1, 2005.

I. Introduction

    On October 26, 2004, the National Association of Securities 
Dealers, Inc. (``NASD''), through its subsidiary, The Nasdaq Stock 
Market, Inc. (``Nasdaq''), filed with the Securities and Exchange 
Commission (``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to establish fee and notice 
requirements for substitution listing events and to provide additional 
transparency for corporate changes requiring a record-keeping fee. 
Nasdaq amended the proposal on May 11, 2005 \3\ and August 18, 2005.\4\ 
The proposed rule change, as amended, was

[[Page 67512]]

published for notice and comment in the Federal Register on September 
22, 2005.\5\ The Commission did not receive comments on the proposal. 
This order approves the proposed rule change, as amended.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 superseded and replaced the filing in its 
entirety.
    \4\ Amendment No. 2 superseded and replaced the amended filing 
in its entirety.
    \5\ See Securities Exchange Act Release No. 52430 (September 14, 
2005), 70 FR 55643.
---------------------------------------------------------------------------

II. Description of the Proposal

    Nasdaq proposes to amend NASD Rules 4200(a), 4310, 4320, 4510, and 
4520 to establish fee and notice requirements for each ``substitution 
listing event.'' The term ``substitution listing event'' would include: 
(1) The implementation of a reverse stock split; (2) an issuer's re-
incorporation or a change in the issuer's place of organization 
(including a change in the issuer's state of incorporation); (3) 
formation of a holding company that replaces a listed company; (4) the 
reclassification or exchange of an issuer's listed shares for another 
security; (5) the listing of a new class of securities in substitution 
for a previously listed class of securities; and (6) any technical 
change whereby the shareholders of the original company receive a 
share-for-share interest in the new company without a change in their 
equity position or rights.
    Nasdaq-listed securities may be divided into two groups: (1) 
Nasdaq-listed securities that Nasdaq designates as Nasdaq national 
market system securities, pursuant to NASD Rule 4400 Series (``Nasdaq 
designated securities''); and (2) all securities that are listed on a 
national securities exchange and subsequently listed on Nasdaq but not 
designated by Nasdaq as Nasdaq national market system securities 
(``Nasdaq non-designated securities'').\6\ For Nasdaq designated 
securities, the proposed notice requirement and fee would apply. For 
Nasdaq non-designated securities, only the proposed notice requirement, 
and not the proposed fee, would apply.
---------------------------------------------------------------------------

    \6\ If a security is originally listed on an exchange and 
designated by the exchange as a national market system security 
under the exchange's national market system plan, Nasdaq would not 
exercise its authority to later designate the security as a national 
market system security under its own national market system plan. 
This arrangement creates uniformity across all markets with respect 
to a dually listed security's ticker symbol, trading halt 
declarations, trade reporting, and status under the trade-through 
provisions of the Intermarket Trading System Plan. See NASD IM-4400.
---------------------------------------------------------------------------

    Nasdaq has stated that, when it learns about a substitution listing 
event for a Nasdaq-listed security, it must implement technical changes 
to its trading, market data, and internal monitoring systems. In 
addition, Nasdaq would disseminate certain substitution listing event 
information about the issuer of a Nasdaq-listed security to other 
markets and market participants through a subscription service.\7\ For 
a substitution listing event relating to a Nasdaq designated security, 
Nasdaq would directly contact the issuer to verify the details of the 
event. For a substitution listing event relating to a Nasdaq non-
designated security, however, Nasdaq would not contact the issuer 
directly to verify the details of the event; instead, Nasdaq would 
receive an electronic consolidated report from the national securities 
exchange that has designated the security as a national market system 
security under that market's national market system plan. The exchange 
would disseminate information on the substitution listing event for 
that security. Nasdaq would use this electronic consolidated report to 
make the necessary changes to its systems.\8\
---------------------------------------------------------------------------

    \7\ Nasdaq has stated that it provides advance notification of 
certain substitution listing events, such as reverse stock splits, 
to member firms, market data vendors, service bureaus, and other 
subscribers of its daily list service. Notification of the 
substitution listing event information on Nasdaq's daily list 
service is subsequently provided to users of Nasdaq's systems 
through a fifth letter identifier, such as a ``D,'' that is 
temporarily added to an issuer's trading symbol. Re-incorporations 
or changes to the place of organization are recorded in Nasdaq's 
internal database, but are not disseminated to market participants.
    \8\ For example, Nasdaq stated that it uses electronic reports 
from the New York Stock Exchange (``NYSE'') to verify the details of 
the substitution listing events for NYSE-listed securities that are 
subsequently also listed on Nasdaq but are still designated by the 
NYSE as national market system securities pursuant to the NYSE's 
national market system plan. The consolidated reports from the NYSE 
contain information regarding reverse stock splits, the substitution 
of a previously listed class of securities for another class, the 
creation of a holding company, and the reincorporation or change to 
the place of organization of an issuer.
---------------------------------------------------------------------------

    Nasdaq has represented that it has dedicated specific resources to 
manage the process for collecting and verifying information for 
substitution listing events and for implementing the related changes 
for its issuers so that such changes are accurately and promptly 
reflected in its trading, market data, and internal monitoring systems. 
To support these activities, Nasdaq proposes to establish a fee of 
$7,500 per substitution listing event for issuers of Nasdaq designated 
securities. Nasdaq has stated that, since the costs associated with 
managing the information for substitution listing events for issuers of 
Nasdaq non-designated securities are reduced through Nasdaq's use of 
electronic consolidated reports from other markets, it would waive the 
substitution listing event fee for these issuers.\9\ Waiving these fees 
also would eliminate the possibility that these issuers would be 
charged twice for the same substitution listing event, since other 
markets charge these issuers a fee for substitution listing events. For 
example, both NYSE and the American Stock Exchange LLC (``Amex'') 
charge a fee for substitution listing events. NYSE charges a ``Reduced 
Initial Fee'' of $15,000 for a substitution listing event \10\ and Amex 
charges $5,000 for a substitution listing event.\11\
---------------------------------------------------------------------------

    \9\ Nasdaq has represented that the lack of such fees from these 
issuers would not impair Nasdaq's ability to fulfill its regulatory 
responsibilities and enforce its rules. Furthermore, although Nasdaq 
relies on consolidated reports in managing the substitution listing 
events process for these issuers, Nasdaq has represented that its 
rules must be ``designed to produce fair and informative quotations, 
to prevent fictitious or misleading quotations, and promote orderly 
produces for collecting, distributing, and publishing quotations' 
pursuant to Section 15A(b)(11) of the Act, 15 U.S.C. 78o-3(b)(11).
    \10\ See NYSE Listed Company Manual Section 902.02. The $15,000 
fee applies only if the change in the company's status is technical 
in nature and the shareholders of the original company receive a 
share-for-share interest in the new company without any change in 
their equity position or rights. If the substitution event does not 
comply with these requirements, the full initial listing fees would 
apply.
    \11\ See Amex Company Guide Sections 142 and 305. For Amex 
issuers, a substitution listing fee applies in cases where, after 
the original listing, a change is made by charter amendment or 
otherwise by which shares listed on Amex are reclassified, or 
changed into or exchanged for another security, either with or 
without a change in par value. Amex also charges a substitution 
listing fee whenever a company implements a reverse stock split, re-
incorporates, lists a new class of securities in substitution of a 
previously listed class of securities, or otherwise engages in a 
transaction which would require the company to file a new Form 8-A 
with the Commission in regard to the previously listed security.
---------------------------------------------------------------------------

    Under the amended proposal, issuers of both Nasdaq designated 
securities and Nasdaq non-designated securities would be required to 
notify Nasdaq about a substitution listing event no later than 15 days 
prior to the implementation of the substitution listing event so that 
Nasdaq would have sufficient time to implement the technical changes 
into its systems. For a re-incorporation or a change to an issuer's 
place of organization, however, Nasdaq would require an issuer to 
notify Nasdaq as soon as practicable after the event has been 
implemented, since such an event may be contingent on shareholder 
approval and would not require immediate changes to Nasdaq's systems.
    Finally, the proposal would require an issuer to notify Nasdaq of a 
corporate action that would require the payment of a record-keeping 
fee. Specifically, Nasdaq proposes to amend NASD Rules 4310(c)(20), 
4320(e)(18), 4510(e), and

[[Page 67513]]

4520(d) to clarify that an issuer of a Nasdaq-listed security that is 
subject to a record-keeping fee must submit the appropriate form to 
Nasdaq within ten days after a change that requires payment of a 
record-keeping fee. Nasdaq has represented that this proposed change 
reflects the current practice of Nasdaq issuers.

III. Discussion and Commission Findings

    After careful review of the proposal, the Commission finds that the 
proposed rule change, as amended, is consistent with the requirements 
of the Act and the rules and regulations applicable to a national 
securities association.\12\
---------------------------------------------------------------------------

    \12\ The Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    The Commission believes that the proposed notice requirement for a 
substitution listing event is consistent with Section 15A(b)(6) of the 
Act,\13\ which requires that the rules of a national securities 
association be designed to foster cooperation and coordination with 
persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities; to remove impediments to and perfect the mechanism of a 
free and open market and a national market system; and, in general, to 
protect investors and the public interest. Nasdaq is requiring all of 
its issuers to provide notice of substitution listing events for the 
purposes of maintaining up-to-date corporate information and 
disseminating accurate information about its listed securities. This 
requirement should better enable Nasdaq to perform its essential 
monitoring functions and enhance the flow of accurate market data.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

    In addition, the Commission believes that the fee for a 
substitution listing event is consistent with Section 15A(b)(5) of the 
Act,\14\ which requires that the rules of a national securities 
association provide for the equitable allocation of reasonable dues, 
fees, and other charges among members and issuers and other persons 
using any facility or system which the association operates or 
controls. The fee is designed to offset the costs associated with 
collecting and verifying information related to substitution listing 
events and for implementing requisite systems changes. The Commission 
believes that it is reasonable for a listing market to assess fees on 
its issuers that will enable the listing market to make necessary 
systems changes and to carry out its regulatory responsibilities. With 
respect to the fee waiver for issuers of Nasdaq non-designated 
securities, the Commission notes that it has previously approved a 
waiver of fees based on a security's dually listed status.\15\ Nasdaq 
has represented that its costs for processing substitution listing 
events of Nasdaq non-designated securities are significantly reduced on 
account of Nasdaq's reliance on electronic consolidated reports 
received from the listing market for such securities. On this basis, 
the Commission believes that the proposed fee for Nasdaq designated 
securities and the proposed fee waiver for substitution listing event 
fee for Nasdaq non-designated securities are a reasonable allocation of 
fees among issuers.
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    \14\ 15 U.S.C. 78o-3(b)(5).
    \15\ See Securities Exchange Act Release No. 51005 (January 10, 
2005), 70 FR 2917 (January 18, 2005) (approving, among other things, 
the waiver of entry fees, application fees, and additional shares 
listing fees for securities that are originally listed on a national 
securities exchange but later dually listed on Nasdaq).
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    Finally, the Commission believes that codifying a requirement for 
an issuer to notify Nasdaq of the payment of a corporate record-keeping 
fee is reasonable and consistent with the Act.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\16\ that the proposed rule change (SR-NASD-2004-162), as amended, 
is approved.
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    \16\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 05-22181 Filed 11-4-05; 8:45 am]
BILLING CODE 8010-01-P

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